In vertebrates DNA methylation has been shown to play a key role in gene expression: an inverse relationship between gene expression and DNA methylation is now well established even though its mechanism is incompletely understood. CpG sequences in tissue specific genes are methylated when the genes are silent and become unmethylated when the genes are expressed. We have investigated two aspects of this problem: a) the biochemical mechanism underlying conversion of mCpG residues to CpG residues and b) the mechanism linking promoter methylation to inhibition of gene expression. Two different models have been proposed to explain the documented loss of mCpG during gene expression: i) we and others have shown that hypomethylation occurring concomitantly with cell duplication can be explained by inhibition of maintenance methylase through two cycles of DNA replication and ii) in the absence of DNA duplication hypomethylation involves replacement of a large fraction of mC in mCpG sequences with cytidine as first demonstrated by Cantoni, Razin, and collaborators. The mechanism by which methyl groups at the promoter region exert an inhibitor effect on gene activity may be studied by examining the relationship between gene expression and methylation of specific sites in its preinitiation domain. our recent results support earlier suggestion that a mediator protein is involved in the mechanism of promoter inhibition.